The News & Observer

Raleigh, N.C.

November 9, 1995

State incentive plan mulled

Dudley Price, Staff Writer

Copyright © 1995, The News & Observer

The state would be able to offer additional incentives to industries under a plan being considered by an advisory group.

RALEIGH - State incentives for luring companies to North Carolina would be significantly expanded under a proposal being considered today by an industry-recruiting advisory group.

Historically, state incentives have been limited to job training for employees and infrastructure improvements such as extending roads and water and sewer lines to plant sites. But the state would be able to offer an array of additional plums - among them corporate tax credits and tax cuts - under a proposal the North Carolina Economic Development Board will discuss when it meets in Lenoir.

The board isn't expected to make a recommendation until early next year on the proposals which are designed to make the state competitive with its neighbors who, in recent years, have won large projects by offering sweeter incentive packages.

"The problem is that other states have rapidly expanded their use of tax credits and it looks like it's affecting North Carolina's competitiveness," said Rick Carlisle, the governor's economic policy advisor.

"The task force is recommending these changes to lower North Carolina taxes on new investment, but it's clear we haven't gone as far as other states," Carlisle said. For example, South Carolina, Georgia and Alabama have exempted some new companies from property taxes.

The recommendations were made by a task force appointed by Gov. Jim Hunt, which has been studying the matter since June.

Under the proposal, which would have to be approved by the legislature, companies would not qualify for extra incentives unless they offered wages that were 10 percent higher than the county or state average.

Recommendations include:

- Expanding an existing jobs income-tax credit into all 100 counties. In the 25 most economically depressed counties this credit would increase from $2,800 per job to $4,000 over a four-year period. In the 25 least economically depressed counties which don't get a job credit now, companies would qualify for a $300 credit per job.

- Allowing an investment credit equal to 10 percent of a company's investment in machinery and equipment.

- An exemption from the state's 1 percent sales tax on machinery and equipment, and an exemption for four years on the 3 percent sales tax on gas and electric consumption generated by new development.

- Create new tax credits for research and development, and for training workers.

The proposal comes at a time when incentive programs are bing challenged. A Forsyth County judge ruled this summer that cash incentives and some other concessions were unconstitutional, and last Friday the state Supreme Court agreed to review that decision.

Even if the Supreme Court upholds the lower court's decision, Carlisle believes the proposed incentives would be allowed.

"The case deals with local expenditures, it does not deal with tax credits in the state tax code which have been on the books for some time," Carlisle said.

Jim Sineath, president of Commercial Carolina Corp., a Raleigh company that locates sites for businesses considering moving here, said the extra incentives would help bring new industry to the state.

"We don't need to offer and shouldn't offer large cash incentives, but what we should be doing is staying at least as aggressive as states in our peer group. We have to stay on a level playing field."

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Copyright © 1995, The News & Observer.

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